The IWH research institute today became the third of Germany's six leading economic think tanks to revise down its 2005 GDP growth forecast after trimming its prediction to 1.3 per cent from 1.5 per cent.
The basis for the recovery in Europe's biggest economy will broaden, with exports playing less of a prominent role, the Halle-based institute said. But it is likely to take longer for households to lose their reluctance to spend.
"The impetus from domestic demand will strengthen but will be partly taken up by imports which will receive a boost from the strength of the euro," it added.
The IWH also pared its forecast for this year, to 1.7 per cent from a 1.8 per cent prediction published jointly by the six institutes in October.
"Exports, until then the only factor powering growth, declined in the July through September period," said the institute, the only one of the country's six leading economic institutes based in eastern Germany.
"An increase in investment and a strong build up of inventories were unable to compensate for the loss of growth from foreign trade and the economic recovery was interrupted," it added.
Adjusted for working days, the IWH said it expected 2004 growth of 1.2 per cent and expansion next year of 1.5 per cent.
The Essen-based RWI institute last week cut its unadjusted 2005 growth forecast to 1.3 per cent, from a joint 1.5 per cent, citing the negative impact of high oil prices and the strong euro.